CommentariesHow UNC Spends Its Money

We report on how much the university system spends on actual teaching as opposed to non-student expenditures.

Organizations committed to reforming state government know that transparency is critical: sunshine is the best disinfectant. At a recent meeting of the State Policy Network, a national group of such organizations, it became evident that transparency is also the way to reform college campuses.

Hidden in the dark, financial scandals have grown and festered on college campuses. At North Carolina State, for example, the governor’s wife was hired for a sinecure position, then, three years later, given an 88 percent raise. At UNC Chapel Hill, a program to provide support for soldiers returning from Iraq and Afghanistan used up most of its $10 million in federal money with no visible accomplishments, but with half its staff receiving six-figure salaries, and extensive money paid for staff travel and consulting.

In the coming months, the Pope Center will be exploring finances of the UNC system in order to better understand whether the system is properly acting as a fiduciary of taxpayer money.

I’m starting with university expenditures. Expenditures illustrate universities’ priorities, so they are a good gauge of universities’ fidelity to taxpayers’ wishes.

Although the federal government collects data from universities each year, finding those data and organizing them in a meaningful way is tricky. Data are available on the Integrated Postsecondary Education Data System (IPEDS) website of the Department of Education, but without careful research and considerable patience, the information isn’t very meaningful. The table below will clue you in—it shows how much universities spend on instruction, research, and other expenditures.

Universities classify most of their operating costs as “educational and general expenditures,” which include all money spent directly on instruction plus additional costs that supposedly relate to student education. On average, educational and general expenditures represent 72 percent of all expenditures at public universities. These core expenses generally exclude auxiliary enterprises, independent operations, and hospitals.

Unfortunately, although schools must submit data to IPEDS in exchange for federal recognition for financial aid and other funds, they are given leeway in what they include in each expenditure category. Each department (or university, for that matter) can follow its own guidelines on crucial financial issues. For example, a department can decide whether professors’ public service and research activities are budgeted separately or simply included in faculty salaries. Andrew Gillen and Rich Vedder point out in their paper North Carolina’s Higher Education System: Success or Failure “some ‘instructional costs’ likely include research activities, at least those funded by the institution through low teaching loads for faculty.”

Despite these problems, it is possible to draw some limited conclusions.

Costs per student vary widely. They range from $15,173 in total at Appalachian State University to more than $60,000 at UNC Chapel Hill. Even within expenditure categories, there is remarkable variety. For example, Elizabeth City State spends far more on Student Service (which includes expenditures for admissions and registrar activities) than any other school in the system. In many cases, it’s unclear why expenses vary so much.

At most UNC schools, more is spent on research, public service, and institutional support than directly on instruction. For example, at North Carolina State University, non-instructional expenditures are nearly double instructional expenditures. The notable exception is UNC School of the Arts, which spends no money on research at all and where instruction is very expensive. (Total general and educational expenditures per student at UNCSA exceed the total at N.C. State.)

Institution type matters. For the most part, per student expenditures are highest at universities that the Carnegie Foundation for the Advancement of Teaching classifies as “Research Universities”—like UNC Chapel Hill and N.C. State. (An explanation of the Carnegie classifications can be found here.) Both instruction and support services are more expensive on a per student basis at such schools (UNCSA is a high-cost outlier). Some of those expenses can be explained by the presence of medical, law, and graduate schools, which require laboratory space, intensive instruction, and specialized equipment. But why are expenditures per student more than $26,000 more at UNC-Chapel Hill than at N. C. State? Both are rated RU:VH (that is, research universities with “very high” research activity.)

As the next table shows, most general and educational expenditures are paid by the taxpayer. Tuition covers only a small fraction of each student’s education. In some cases, it covers less than half of instructional expenditures. (Tuition data comes from CollegeResults.org.) For example, at UNC-Chapel Hill, tuition covers only eight per cent of the total. At Appalachian State, the figure is 27 percent.

Some important questions remain. Why are support services so costly? Are North Carolina taxpayers really supporting instruction—or are they subsidizing research by faculty and graduate students? Should tuition cover a higher percentage of student expenditures? Who actually benefits from university expenditures?

Over the coming months, I’ll look at more data that can help taxpayers answer these questions. I’ll look at all the sources of university revenue (tuition, fees, private donations, state and federal government) to help determine how much of the bill for the UNC system is being paid for by taxpayers. I’ll look at how much money is going to faculty and administrative salaries. And I’ll try to determine how much it costs the system to produce a graduate instead of just a full-time enrolled student.

While I’ll make an effort to uncover university finances, I believe that the universities have a critical role to play. As a starter, universities in the UNC general administration should insist that all departments separate expenditures for research and public service from instructional expenses, so that taxpayers and lawmakers can determine what each university is really spending on instruction.

Transparency is the first essential step in ensuring that North Carolina’s public universities are upholding their fiduciary responsibilities to taxpayers and students. We’ll do our part; they should do theirs.